The ink is dry on a nearly $1.1 billion contract to build what will be the world's largest diameter deep-bore highway tunnel beneath downtown Seattle.

At a ceremony Thursday at the Port of Seattle headquarters, state Transportation Secretary Paula Hammond signed the 154-page agreement with representatives from Seattle Tunnel Partners, a joint-venture that offered the winning bid to dig the planned 1.7 mile long tunnel to replace the Alaskan Way Viaduct.

Seattle Tunnel Partners outbid one other team, Seattle Tunneling Group, with a proposed price of $1.09 billion to build the tunnel itself. STP includes New York-based Dragados USA, whose parent company is ACS of Spain; and HNTB Corp., which is headquartered in Kansas City and has a Bellevue office; and Tutor-Perini of California. Transportation officials said the winning bid was slightly higher than a bid from competitor, but Seattle Tunnel Partners' proposal was notable for its soil protection plans, as well as its anticipated schedule and design aspects. A wider roadway was also promised by the construction team.

The contract could be worth up to $1.42 billion, depending on whether the construction team can hit certain bonuses in the contract for things such as completing the tunnel ahead of schedule and successfully protecting downtown buildings from damage during construction.

The state also offered about $210 million in allowances and incentives from a $415 million reserve fund to keep the project within budget. Half of that money was to cover higher inflation estimates and higher costs for insurance and bonding.

"We understand the importance of being accountable to the taxpayers of Seattle and to the state of Washington," said Manuel Pardo, the project executive. "We will deliver the project on time and on budget."

The construction team's staff would begin moving into offices in the Wells Fargo meeting Monday, he said.

Construction, which can't begin until approval by the federal government, is expected to begin later this year. Eventually, a 57-foot diameter boring machine will burrow beneath downtown, starting from Alaskan Way in Sodo, and lay the framework for a tunnel that will have two road decks and be the world's largest soft-ground tunnel when it opens in 2015 or 2016.

Due to the risks involved in tunneling through Seattle's glacial soils and the fact that this will be the largest highway tunnel yet built, many, including Mayor Mike McGinn, fear the project could cost more than estimated. The budget for the entire tunnel project, including the portals, property acquisition and management, is about $1.96 billion and the cost estimate for the entire viaduct replacement project, which includes work to demolish the southern stretch of the viaduct and the city's plans to build a new waterfront park, is $4.2 billion.

Two citizens' groups are leading efforts to block the project.

On Thursday, one of two citizens' groups fighting the project announced it had raised enough signatures to place anti-tunnel Initiative 101 on the ballot in May. Organizers of Seattle Citizens Against the Tunnel say they've collected 22,271 signatures for Initiative 101, which would prevent the city from allowing city property to be used for tunnel construction. To qualify for the ballot, SCAT needs 20,692 valid signatures.

SCAT organizer Elizabeth Campbell said in a news release that the group will continue its petition drive up to February 1 deadline.

Mirroring SCAT's efforts, a second coalition of civic groups formed Move Smarter Seattle, which has filed another initiative that would aim to protect Seattle from paying any cost overruns before construction starts. In the legislation that launched the tunnel plan, state lawmakers included a clause sticking Seattle with any potential cost overruns.

The City Attorney's office has conducted a preliminary analysis of I-101's merits but won't reach a final conclusion until the Clerk's Office has verified that enough signatures have been collected to qualify the measure for the ballot, spokeswoman Kimberly Mills said.

The state's contribution to the tunnel project is capped at $2.8 billion, which includes $400 million from tolls that would be collected on the new tunnel. The Port of Seattle would chip in another $300 million.

"The State and Seattle City Council have made it clear that they intend to blindly plow forward no matter the cost," said spokesman Drew Paxton in a news release. "Our elected officials are displaying a blatant disregard for the potentially devastating financial implications of this project. Given the devastating budget cuts that have already occurred at the state level, and the $4.6 billion deficit facing our state in 2011-2013, this is beyond irresponsible, it's immoral."

WSDOT views both initiatives as "hypotheticals" and planned to continue moving forward as directed by the governor and Legislature, said Ron Paananen, WSDOT's administrator for the Alaskan Way Viaduct replacement program.

"Those things will have to be resolved as they go forward. But we've been advancing this project since January 2009 with the direction we received at that time," he said.

The Seattle City Council plans to take up a series of agreements with the state in February on right-of-way, permitting, and utility relocation, which must be signed before the project can start. The second initiative would ensure the City Council doesn't sign the agreements until Seattle is protected from having to pay any overruns on the project.